Oil prices rise as traders await next OPEC+ supply changes

(Bloomberg) – Oil has traded near the highest level this year after a surge on OPEC+ supply cuts caused the market to tighten.

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Global benchmark Brent remained little changed below $89 a barrel after rising for five days and lifting futures by more than 5%. Meanwhile, U.S. West Texas Intermediate crude remained above $85 a barrel.

Crude oil prices are up about a quarter since late June as the impact of supply cuts – led by Saudi Arabia and Russia – weighed on the market. Riyadh and Moscow are expected to announce their next steps in the coming days, with cuts likely to be extended.

“The three rounds of production cuts by Saudi Arabia and its OPEC+ partners since September 2022 fully explain the return to a large deficit,” analysts at Goldman Sachs Group Inc. including Daan Struyven said in a note, estimating the deficit at 2 .3 million barrels per day this quarter. “The return to deficits, in turn, largely explains the summer rally in timeframes and oil prices.”

Brent’s prompt spread — the gap between the two closest contracts — has hit 75 cents a barrel in backwardation, up from 58 cents a week ago. This is a bullish pattern where short-term prices are trading at a premium to more distant prices.

The generally optimistic sentiment was reflected in comments at S&P Global Commodity Insights’ APPEC conference, taking place over three days this week in Singapore. Commodity trader Trafigura Group said oil prices could rise as higher interest rates and underinvestment weigh on the market.

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– With the support of Yongchang Chin.

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